SEC gives advice on misstatements

A new bulleting released by US regulator, the Securities and Exchange
Commission, is aimed to help companies erase prior misstatements on their
financial statements and also explains how, going forward, companies should
quantify errors and correct them.

The bulletin offers guidance on determining whether an error in a company’s
financial statements is material enough that it be corrected.

According to the WebCPA, this is a significant problem because errors that
are insignificant in any given year can build up over time to a point at which —
if they were corrected — would materially distort the financial results in the
year in which the correction is made.

‘Companies are required to correct these errors, but in a less painful way
than they otherwise might have needed to,’ said Scott Taub, deputy chief
accountant at the SEC.